Cash-strapped MNL put into examinership

A telecommunications firm with a workforce of 120 and employing 120 subcontractors cannot pay its debts because of a £2 million (#2.5 million) dispute with Irish Rail over work done on installing a centralised traffic control system, the High Court heard yesterday.

The row is one of the central issues in a Government inquiry into the centralised traffic control contract, which has become known as the Mini CTC.

Mr Bill Shipsey SC, counsel for Modern Networks Ltd (MNL), successfully applied to Mr Justice Joseph Finnegan for the appointment of an examiner to the company, which is in financial difficulties as a consequence of the contract entered into with Irish Rail four years ago.

Mr Shipsey told the court MNL was unable to pay its debts as a result of Irish Rail having failed to pay it £2 million under an agreement secured in March last. He said that, on May 30th, Irish Rail unexpectedly served MNL a notice of intention to terminate the Mini CTC on grounds which MNL claimed were invalid.

He said that last Monday, MNL, of St Lawrence Road, Clontarf, Dublin, passed a resolution seeking the protection of the court and the appointment of an examiner, Mr Jason Sheehy, of BDO Simpson Xavier, Merchant's Quay, Dublin.

Company director Mr Brian Powell told the court the Mini CTC contract got into difficulties at an early stage and had been the subject of ongoing talks for a considerable time. These negotiations had concluded in an agreed settlement, conditional on Irish Rail and CIE board approval in March last and would have resulted in a £2 million payment to MNL in respect of monies already spent on the contract by MNL.

He said the Mini CTC covered the design, supply, installation and commissioning of a centralised signalling system to replace the old mechanical signalling at 27 stations on the Ballinasloe-Galway, Athy-Waterford, Maynooth-Sligo and Mallow-Tralee lines. It involved the provision of a fibre optic backbone from Dublin to the extremity of each line.

Mr Powell said installation activities on the Mini CTC were substantially frustrated through no fault of MNL, leading to delays and increased costs. Increased safety requirements, introduced by Irish Rail, had increased dramatically the cost of installation activities. Despite all of this, MNL had practically completed the installations.

During the course of the Mini CTC, Irish Rail had entered into a separate contract with MNL to lay cables for Esat Telecom over the Irish Rail network. It was the intention of the parties that Esat cable would be laid at the same time as Irish Rail's signalling cables. Difficulties in the Esat-Mini CTC specifications, along with other considerations, had led to increased costs.

Mr Shipsey said MNL shareholders had already injected #1 million of additional share capital and had promised, on the grounds that satisfactory terms could be reached with Irish Rail, further monies to restructure the financial position of MNL.

He said that, notwithstanding the action by Irish Rail, the principal shareholders had indicated a willingness to support the profitable telecommunications business of MNL and Eircom had indicated it would support the telecommunications business of MNL into the future.

Mr Shipsey said that, in the light of the action taken by Irish Rail, MNL was insolvent but liquidation would result in a very poor outcome for creditors. If MNL continued to trade under an examiner, it was likely to overcome its difficulties. An independent accountant's report was of the view there was a reasonable prospect of the survival of MNL and the whole or part of its undertakings as a going concern. Mr Justice Finnegan appointed Mr Sheehy as interim examiner.